Open Banking & Identity: Navigating SCA & Compliance
Blog post from Didit
Open banking, driven by regulations like PSD2 in Europe, is reshaping the financial services industry by allowing third-party providers to access customer banking data, thereby fostering innovation and competition. However, this shift introduces significant challenges in identity verification, primarily due to Strong Customer Authentication (SCA) requirements, which necessitate multi-factor authentication involving at least two out of three elements: knowledge, possession, and inherence. Traditional identity methods, such as SMS-based OTPs and knowledge-based authentication, have become insufficient to meet these demands and prevent fraud, prompting financial institutions to adopt advanced technologies like behavioral biometrics and risk-based authentication to enhance security and reduce user friction. Central to managing these complexities is an effective identity orchestration platform, which integrates various verification methods into a single system, streamlining the user experience and reducing operational burdens. The platform Didit, for example, provides a comprehensive suite of identity verification tools through a single API, offering benefits such as improved fraud detection, enhanced user experience, and scalable, cost-effective solutions for complying with SCA and PSD2 requirements.
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